3 rjfa owolabi usman--35-47

Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol 2, No 3, 2011

The Role of Capital Market on Economic Growth in Nigeria (1980-
2008)

Usman Owolabi Akeem, Phd
Faculty of ManagementScience,PMB4000, LAUTECH,Ogbomoso,Nigeria
e-mail-labisky@yahoo.com, Tel:+2348036675099

Abstract
The capital markets play important roles in the economy growth of the market. A well functioning market insures
that both corporation and investors get or receive fair prices for their securities. It examine the impact of capital
market on the Nigeria economy and also examine how stock exchange market has contributed to the economic
growth which aims at studying the second tier securities market. The secondary data employed for this research
work were sourced from the statistical bulletin of the Central Bank of Nigeria (CBN) 2008. The ordinary least
square is used for all variables in order to determine the linear relationship between the independent and independent
variable. Using Statistical Package for Social Sciences (SPSS). Multiple regression models were adopted in this
research work with the result from this regression model show that the R 2 for model one and two are 0.840, 0.888,
which implies that 84% and 88% variation in the dependent variable can be attributed to the variation in the
independent variable, Also R2 – ADJUSTED OF 0.799 and 0.874 implies that 79% and 87% show a minimize error
from the coefficient of determinant (R2). In conclusion, it has been observed that this ensures that valuable projects
will be financed and negative value project will be rejected. Most importantly will argue that integration into the
world capital market will accelerate the growth process.
Keywords: Market Capitalization, Inflation rate, Turnover and Real Output.

1.0 Introduction
Securities were first floated in Nigeria early as 1946, although there was no systematic and organized capital market
with all the attendant institution until the establishment of the Central Bank of Nigeria (CBN) in 1959 and the
launching of the Lagos stock exchange in 1961. Before this event, it was difficult for the government to raise fund
locally for the sale of stocks. It was difficult to mobilize adequate local savings even though the volume of such
savings was increasing. It was still more difficult to provide facilities for the government to sell part of the
increasing volume of industrial shares that it was holding through its participation in joint ventures.
As a result of the establishment of the Central Bank of Nigeria, there came into existence a wide variety of
domestic securities such as Bonds, Shares, Development stocks and premium Bonds. These were issued and offered
for sale to the public. The central Bank played a vital role in the management and marketing of government
securities, sometimes indeed the central bank act as the main holder of such securities when the market become
saturated until such securities were sold to the public mostly to those who saves the institution like the personal
fund and insurance company.
In floating the first federation of Nigeria development stock in 1959, The Central Bank attempted to
introduce arrangement for the growth of market in securities. Commercials Banks were requested to accept potential
buyers and sellers whose names where then transferred to the central Bank where central register was maintained.
The commercial Banks thus serve as a link between potential buyers and sellers. The central played the roles of
establishing price for stock sold in the market.
The Lagos stock exchange market (L SM E) was established in 1961 and since that time government stocks
started being traded on the capital market even though the central Bank started to manage the issue of government
securities. There were only nine issues of development stock between the year of 1962 and 1972 in an attempt to
increase the volume of funds available to governments in particular, the insurance, (miscellaneous provision) act
was passed in 1964. the act required insurance coy to invest locally at least tow-fifth (2/5) of the premium receives
on locally insured risk. The act stipulated as from 1 st April 1966 the investment of the insurance coy in Nigeria must
be less than the value of fund covering all endowments assurance policies dating back to 31st March, 1992. It
stipulated again that a least one quarter of their local investment must be in government securities.

35

Vol 2, No 3, 2011

Another step at increasing the volume was taken in 1961 then the income act was passed under this acts,
the existing pension and provident funds were required to invest at least a (1/3) of their funds in Nigeria government
stock in order to continue to qualify for tax exemption.
Another important step at developing and expanding the Nigerian capital market was the indigenization decree
1972, which required that 40 of the capital of some of the foreign owned companies must be made available to
Nigerians by this single steps, many countries offered their shares to the public especially to those that have not been
listed on the Lagos stock exchange market before this decree became quoted/coated. This increase size and volume
of activities at the Lagos stock exchange both in participation and in exchange of operation.

To further increase in the number of securities quoted on the Lagos stock exchange, the federal government in its
1977/1978 budget indicated that the state government would be allowed to have their own bond. Similarly, in order
to provide funds more abundantly to certain sectors some banks were established these were:
1. The Nigeria industrial development bank (NIDB)
2. The Nigeria bank for commerce and Industrial (NBCI)
3. The federal mortgage bank formerly the Nigeria building society.
These banks are to provide long and medium term loan for investments in manufacturing agricultural,
commerce, pharmaceutical, petrochemical and real estate respectively. All these steps were taken in order to
improve and expand the scope and extent of operation of capital market in Nigeria.

1.1 Statement of the problem
The Nigeria economy has been bugged down with a lot of socio-economic and political malaise antithetical to
economic growth. Capital market in the world over serve as veritable channels to mobilize both domestic and
foreign savings for the development purpose. But despite the fact achieved by the Nigeria capital market in the area
of capital formation over the years, individuals, corporate bodies and government were yet to take full advantage of
opportunities in the markets, because they experience lack of recovery fund.

1.2 Objective of the study
The primary objective of this study:
 It examines the impact of capital market on the Nigerian company economy.
 Specific objectives
 To examine how the stock exchange market has contributed to economic growth
 It also aims at studying the objectives of second tier security market (SSM) with a view of assessing their
performance.

2.0 Theoretical Frame work
In Nigeria, experience has shown that the revenue generated from taxation and statutory allocation is not enough to
finance recurrent and capital expenditure of most state governments of the federation therefore, if is necessary for
the government to look for other avenue to source funds such as capital market for capital inflow to bridge their
growth gaps. For economic growth and development of any economy, the existence of a good financial system is
needed or necessary.
According to Oyindo (1994), financial market is a complex of institutional arrangements that facilitates the
intermediation of funds in an economy. Onyike (1984) define financial markets as the market consisting of the
money and capital market with the money market catering for short term and medium term funds needed, while the
capital market cater for long term funds needs but with its activities revolver round stock exchange.
Van (1962) sees the financial system as market which includes all institutions and procedure for brining all
sellers of financial instrument together that no matter the nature of financial instrument.
Okigbo (1998) in his own view sees financial system as a family of rules and market their transaction with
the rest of the economic domestic and oversees regulations and collection of financial arrangement institution, agent
and the mechanism whereby they relate to each other with the rest of the world.
Ojo (1998) sees financial system as a system which covers all financial institutions incuding the Central
Bank of any economy. Phillips (2001) in his own view that financial system is the complex of institution and

36

Vol 2, No 3, 2011

mechanism whereby medium and long term fund are pooled and made available to business government and
individual thereby instrument already outstanding are transferred.
Spreacher (1987) asserted that the financial market consist of both the money and capital market and refer
to the financial market as the securities market. Unlike the earlier Keynesian liquidity preference theory, this work
recognizes the part of intermediation of credit creation both borrowed over investors in their reconsidered theory of
banking, they elaborated upon the roles of financial intermediate in saving and investor process for development.
The argued that the growth of financial asset institutions and market correspond with that of economy growth. In
this regard, Shaw and Mick in (1973) introduced the concept of ‘financial Deepening’ i.e increase in financial asses
shock in relation to GNP and develop a model to explain the complementary of financial deepening with
accumulation of physical capital through their empirical evidence from difference countries study on their economy
growth.
More specifically, High Patrick (1982) works particularly in relation to developing countries especially in
those countries where capital market are either non existence under developed or under utilized. The latter two cases
are true of the Nigerian capital market. His contention was that lack of demand for financial institution in the
developing countries is denied to factors such as excessive regulatory controls, restrictive banking legislation and
region barriers in some countries. Market distortion and imperfection this thesis was that of equation of supply led
system which could stimulate the demand of services of those financial institution in which case supply creates its
won demand while Japanese case illustrate that supply led policies could enhance public awareness as to the
advantage of the financial market and this create its own demand.
David Gill (1982) on his own part extended the thesis through inter-country analysis, comprise and observe
that monetary intermediaries such as savings and loan institutions, investment trust pension fund and security market
tend to grow as country especially on economic development and structural change from its growth and whilst the
scope of the communal system reduces he used is observation in the various segment of finance system to develop
the ‘planed approach’ while emphasizing the development of non market sources of finance such as the security
market.
In his study he discovered that in growth economy about two decades ago the banking system supply 80-
90%. The Finance originated from financial institutions against a decline about 40% unless in present times. This
pattern is being followed by developing countries. The significant of open market for primary security in developing
countries is not usual as it is a mere reflection of the low level of development and in turn per capital income, thus,
the investment saving mechanism is still rudimentary in those countries affected by growth. Studies have shown that
in the absence to open market in primary securities, the role of monetary system is intermediate and very crucial
thus, in many developing countries the banking system is depended upon to promote investment through the issue of
currency, demand deposit (DD) and time deposit (TD) which can be extended as credit to private and public
investors.
Alile (1986), subtle therefore the system can accommodate internal set off finance savings investment in
SMEs, family growth and so on. More, so when access to alternative to difficult capital market are under develop
and under utilize the lack of demand for this institutions could be due to a number of factor like excessive regulatory
controls, social cultural imperfection and distortion in the operation of market mechanism. (Falegan 1989).
2.1 Efficient Market Hypothesis
Tinic West (1980) said that capital market is characterized with divisibility that is distributing wealth
between shares and also with liquidity which is to convert asset into cash which may not be possible if the market is
not efficient. Efficiency enables investors to rate a company for higher yield and also to know the economy stands.
According to Perled (1974) said that capital market is the one in which security prices fully reflects all publicity
available information concerning securities trades such a markets is efficient in view that if properly it fulfills the
primary roles of capital market and the optimum allocation of resources.
Capital market is known to be planning the role of allocating economy’s resources overtime which will
then be regarded as allocation efficient when they establish securities prices and have operating characteristics that
encourage the economy capital to flow to individuals from the organization with the most promissory real
investments for economic growth opportunities or an efficient capital market will channel liquid capital accurately to
where it will do the nation good.
Famo (1970) put it that an efficient market hypothesis is efficient in the processing information the prices
of securities observed at anytime are based on correct evaluation of all information when firms issue securities that
represent ownership of firm activities, they can do so under the assumption that they are paying fair prices and then
became good education of values. Where there is no useful information for predicting future price change, the best

37

Vol 2, No 3, 2011

give for tomorrow prices therefore becomes today’s price and this is called Random weak hypothesis. Random weak
hypothesis theory is used in stock price movements that are completely random and not predictable.
Efficient adherence to the random weak hypothesis (RWH) which eliminates the usefulness of part prices
information which is called the weak form of the efficiency markets hypothesis while semi-strong of the market is
that an asset is worth what the market says it worth and that market quickly and correctly evaluates all public
information related to the assets worth which are very useful to the investors. The strong form of the efficiency
capital market is that market generally anticipates the release of useful information so that insiders cannot beat the
market of information.
An insider means a chairman or managing director, secretary, company, auditors and chief executive from
buy their privilege internet to quantity in or manipulate the prices of a company’s secretary their personal gain
capital market is also operate efficient when buyers and sales of securities can purchase transact sales show at prices
that are an low as possible given the cost associated with having their sales provided. These prices at that put in time
represent the best estimate of security “intrinsic value” prices are fully reflected inform when there is an assumption
that the expected prices of a security in one period is the future, given to day’s relevant set of information is equal
today’s prices and expected return for the next period.
Kaldor and Aniwire (1961) on their own cited and agree that aggregate saving ratio depend on the
distribution of income, the larger the savings the larger the capital.
According to apostle Hayford, Alile the director general of the Nigeria stock exchange said that quotation is
one of the funding avenue open to SMEs in Nigeria since 1985. When the Nigeria stock exchange kindled the
second tier securities market (SSM).
According to apostle hayford, Alile the director general of the Nigeria stock exchange said that quotation is
one of the finding avenue open to SMEs in Nigeria since 1985. When the Nigeria stock exchange kindled the second
tier securities market (SSM).
SMEs can actually enter the Nigeria capital market to raise long term capital and for the financing of new
project expansion as modernization existing industrial and commercial concerns before the introduction of SSM the
stock.
2.2 Compositions of Capital Markets
Financial system incorporates financial instruments, financial institution, financial markets and organs
operating within the system.
The financial market can be grouped into two:
Money market and Capital market.
The capital market is may main concern which is the market for long term able funds for commercial and industry.
Different economic have many various on the forms of the markets but my emphasis will be based on
capital market.
Sharpe W.F. (1964) was of the view that for the capital market to play any significant role groups of
borrowers and inventors would come together, trading would tend to occur when lying along investment frontier
because of the interaction between borrowers and inventors which is necessary condition for a country’s take-off.
Van(1962) believed that capital market includes the credit and equity market instrument that are not
considered a part of money market. The capital has many separates markets like the market for corporate, state and
local government bonds markets for long term federal obligation and the market for equity instruments.
According to Bullion (1994) he said that it is the market the deals in long term loan able funds. The market
is the source for which industry obtain is capital from expansion and modernization and from which the gout
borrows on long term basis of development purposes. With the indefinite term of 5 years and above, loan instrument
(securities) traded in the market include equities, federal government, stock government loans, company loans,
dubieties etc.
For policy encourage savings to be accomplished suitable institutional machinery needs to be provided for
their mobilization and such mechanism is essential for the private sectors and well an useful for the government
sector to tap the available resources either to wide take a new investment or add to existing capacity.
In essence, the interactive tendency of saver and the inventers mean we the importance of a capital market.
Therefore, effectiveness of market depends on the volume of savings, the number of savers and the degree of
sophistication of the investing public.
Bervil (1973) believed that capital market replaces labour mentality in less developed counter with the catalyst
mentality by giving workers equity participation rather than increasing their wages in enterprise because equity
generates dividend and a stimulus to owning property.

38

Vol 2, No 3, 2011

Capital market leads to economic growth only when there are enough savings and finances. Bervil also
believe that capital market also leads to development and developing countries capital market leads to economic
growth because it does not create debt and rather, it erases all loaners to economic growth.
Olaleye (1998) believes that it’s a network of financing situation that arrange for sale and purchase of long
term financial assets such as shares, debentures and mortgages. They are long term financial assets because their
claim remains for a long-term and it is divided it into two market.
1. Primary markets and
2. Secondary markets
Primary market is a market where new issue of separation such as stock and shares are sold for cash while
Secondary market is a market where the existing issued separation are bought and sold.
Ijewere (1983) argued that industries respond both to their own estimate and judgment of business to
capital market environs with efficient and dependable mechanism through where long-term financial instrument
can be raised and traded.
Schatz (1964) and Kayode (1972) maintained of capital shortage illusion thesis of Schatz’s submission
after further examinant of Schatz’s operate of federal loan board (FLS) over come period put Kayode found that
the noble was not large false demand for capital but migrate. He also argued the viability itself is a function of
object truth about the project (1981) Schatz opened that frequent capital shortage is the effective or operatory
independent of indigenous private investment is mistaken that it is a illusion created by a large false demand for
capital. He said that is a ready exists is not an immediate shortage of capital but a shortage of variable project.
In line with training, it is not intention that success since gout in requires had adopted value named at time
revising earlier, in effect at promoting economic growth.
But one of the most sustained is the maintenance of specializes economic and financial institution to provide
accelerated industrial development in Nigeria.
2.3 Roles of Economic Growth and Capital Market
Capital market as a means of providing the growth of one technique with industrialization. Other authorities are by
fiscal, external borrowing, inflationary and direct or self-finance are also important.
Many developing countries (like Nigeria) prefer combining these methods as much as possible rather than
closing from the attractive methods.
In capitalized or developed economics, the dominant and most effect techniques of industrial economics
growth are:
1. Utilizing the economic intermediaries and capital markets
2. The economic intermediation or debt asset systematic
Other methods are main fiscal, self or internal and it is predominantly used in West African Countries,
which cannot adequately cope with complexity requirement of growth in present day.
The West African countries have found it difficulty to generate high levels of savings and investments
through transaction and state enterprise profits, considering the fiscal option and it recounted into:
 The accumulate of public expenditure and
 The inadequate and efficient administration of both taxation system and state enterprises.
2.4 Organs of the Market
The LSC was formally known as NSE. The secondary market generating caused stock exchange and it is the prime
operational institution in the capital market.
Established in 1961 by the LSE Act, the LSE was reconstituted into the NSE in 1977 and today have seven
trading floor in Lagos, Kaduna, Port-Harcourt Kano, Onitsha, Ibadan and Abuja. Stock brokers are licensed by the
council to deal in go et al and Industrial securities quoted on the exchange and their conducts are guided by the
exchange’s rules and regulations.
The NSE was established to perform the following:
a. To provide the machinery for mobilizing the private and public saving and making them a valuable for
productive investment through stock and shares.
b. To provide meeting place for dealing member to buy and sell exactly stock and shares as were as provided
opportunities for raising new capital.
c. To facilitate the purchase and sales of security due to facilitate dealing in government securities and
provide goods with funds of development purposes.
d. To protect the public from shady deals and practice in quest securities through its rules regulation and
operating codes with the objectives of ensuring fair dealings.
2.4.1 Automation and the Nigeria Capital Market Statement

39

Vol 2, No 3, 2011

The oxford dictionary defined automation as the use of machine to do work that was prevoluntary done by
people and also mean the loose of many factory jobs. Also the Webster’s Cambridge dictionary defined it as any
method that uses self operating equipment, electronic devices to replace human beings in doing routine of repetitive
work. In order words, automation refers to the process in which machines are used to perform tasks that are
previously require manual skill. Automation within the capital market context therefore means considerable reduce
manual execution of capital market transaction.
In addition, the following function and process have been identified as area where automation is not only
possible but also are already being practical in some developed countries.
1. Price determination process in secondary market.
2. Order execution
3. Order collection and routine
4. Market international system (MIS)
5. Clearly and settlement
6. Market surveillance system
2.4.2 Necessity for Capital Market Automation
The basic motive for promoting security market worldwide can be summarize as follows:
Firstly, to provide secondary market for trading securities, thereby improving the efficiency of capacity
allocation through price mechanism.
Secondly, to foster the mobilization of saving for the purpose of buying security issued by growth or
economic to growth.
Thirdly, provide an alternate source of review other than exact for government.
Fourth, to facilitate the form for all individual to invest their saving in a wide range of risk reward
opportunities and financing to promote rapid capital formation.
In addition to pursuing the above motives for internal growth, government has also the standard
responsibility and ensures that there is an adequate levy of protection for whoever decides to invest in the economy.
To this end, government will ensure efficient in the market, generates a high level of confidence in it assures
standard and stability in the motive mentioned earlier invest the advanced.
The question therefore, how can automation enhance realization of the broad financial objectives policy
mentioned above?
In the first instance, customer of the securities markets has the potential of improving the efficiency of the
market from the point of view of reduces operation cost. For example, automating our already identified process, viz
order collection, will reduce and processing errors that are usually associated with manual system.
The quality of market is also important of it is measure by liquidity and relative price stability. This may be
possible through timely and adequate market information. Pace, volume and company information disseminating
among market professional and investors.
Also better market integrated can be achieved as a result of automatic where there are many branches of the
same stock exchanges situated in different action or where there is independence stock exchange.
Moreover, automated securities market provides sample opportunity implementing policies that would
enhance adequate protection of investors against price regulation and negative effect of inside training. This is
automated and integrated system; market progress and training process able monitored and any unusual investment
in price of volume integrated. At this point, we must agree or identify with the system question trust that there are
two sides to a win or a similar statement that for everything that has some good aspect, it must have its P.
Carefully ugly sides, so in spite of the highlighted and developed of questions automated security market there are
some disadvantages.
2.5 Types of Market automated
A study of automated system shows that they can easily be groped into two broad categories as regards their modes.
The NAS DAW, ANO, SEAQ belongs to dealers market system in which market may continues quote
“ASK” and bid prices at which CAT and CAC system on the other hand belong to the continous action system
where order that match in term of size and price are consummated automatically. We shall briefly describe features
of the ideal market and the auction market below:
2.5.1 AUCTION MARKET SYSTEM
This system is screen based and provides for a continues price quotation based on the auction principle and public
limit order to each security. Apart from the amount and price limit on buying and selling order, the last five trade
order are consistently displayed and it makes the system more visible than the dealer market.
2.5.1.1 Market system in Nigeria

40

Vol 2, No 3, 2011

Pricing and trading characteristics Nigeria capital market system at present, the securities are called out by an officer
of the NSE when trading commerce.
The stock brokers (dealing member) thereafter indicates their interest either abiding or offering a scanty in question
at the price the stock brokers estimate the scanty to be Act times a stock brokers may make across deal if he has both
buying and selling instruction at different of same price. The price of any stock is to a large that influence by the
basis economic principle of demand supply. Other factors both exogenous and endogenous to the economy are also
considered while determining the prices at the call over seasons.
Expected problems
In this season, we shall discuss the possibility of automating the securities transaction process in the
Nigeria net and the problem that be encountered.
a. Order collection and order routine
It involve order collected from the alternate buyers and seller and routine of same from the broker or
collector to the stock exchange given the low level of transaction in the NSE automated the processing not achieve
much.
b. Price determinant and stock exchange breach wage
2.6 Definition to SMEs
The UNE United Nations Economic for Asia (1952) defines as courtage industries of the economy that
carry on whole or partly with the help of the family, either as a whole or part store occupation such as a small scale
industry operates with hiered labour.
Bitro (1954) and (1760) India defined small scale industries as industries established, aiming fewer than 5
employees, If motive power is used and having less than 35,000 rupees of fixed capital investment.
This the central bank of Nigeria CBN (1980) in it’s credit judgment two banks, states that in the case of
commercial bank SMEs can be defined as a enterprise where annual turnover ranges between enterprise with capital
investment not exceeding N2million (exchanging cost of land) or with maximum turnover not more than 5 million.
For the Nigeria bank for commerce and industry (NBCI) in 1981/82 SSE are defined as those with total
cost of not more than N500,000 (excluding cost of land but including working capital). It also adopted the definition
of SMEs as those with cost of capital not excess of N750,000.00 and paid employment up to 50 person such
establishment must be wholly Nigeria owned that is, are companies in the schedule to of the (1977) Nigeria
enterprise promotion decree.
The centre to management development (CMD) (1982) wrote a policy proposal on small industry services
and sub mandated to Federal Government that stated follow:
“A small scale industry is manufacturing, processing or service industry located in a fasting or production types of
operations employing up to 50 full time workers.
But previously in 1974 CMD carried out a research out in Lagos and it was noted that small scale can not
be adequately define in term of number of employees sales, volume, asset employ or a combination of the above
because of inherent fallacy that would be embedded in such definition.

3.0 Research Methodology
3.1 Model specification
In the course of this study, two models will be examined. The first model will make use of real gross domestic
product as the explained variable the explanatory variables are; share index, market capitalization, turnover and
transaction at the stock exchange. The second model will make use real gross domestic product as the explained
variable while the explanatory variables are; inflation rate, transaction at the stock and exchange rate.
The model is expressed as an implicit function and as follows:
Model 1
Y = f(X1, X2, X3, X4)
Where;
Y = real gross domestic product
XI = share index
X2 = market capitalization
X3 = transaction at the stock exchange
X4 = turnover ratio
The model is being expressed in estimation form will be
Y = ßO + ß1X1 +ß2 X2 +ß4X4 +μ

41

Vol 2, No 3, 2011

Where =
ßO intercept
ß1 = coefficient of share index
ß2 = coeffccient of market capitalization
ß3 = coefficient of transaction at the stock exchange
ß4 = coefficient of turnover ratio
μ = stochastic or error term
Model 2
RGDP = f(INF, EXR, TSE)
Where:
RGDP = real gross domestic products
INF = Inflation rate
EXR = exchange rate
TSE – transaction at the stock exchange
The model is being expressed in estimation form will be
RGDP = 0 +1 INF + 2EXR +3 TSE + μ
Where:
0 = intercept
0IINF = Coefficient of inflation
2 EXR = Coefficient of exchange rate
3 TSE = coefficient of transaction at the stock exchange
μ = stochastic error term
A priori expectation
The Expected signs of the coefficient of the first model ßO>0, ß1 > 0, ß2> 0, ß3>0, ß4 > 0.
3.2 Measurement of variable
The multiple regressor is used to anlaysed the data based on three criteria identified by koutsoyiannis (1977) They
are:
a. Economic “ a priori” criteria
b. Statistical criteria
c. Economic criteria
d. Economic “A Priori” Criteria
The statistical criteria are determine by statistical theory as stated below and are aimed at evaluating parameters of
the model they are:
Coefficient of Determination (R2)

It measures the proportion of the variation in the independent variable that is jointly explained by the linear
influence of the explanatory variable. The value of R2 lies between zero and one that is 0<R2<1.
Standard Error (SE)
This test will measure the reliability of estimated parameters the standard error is a decreasing function of the
sample size. The lower the standard error, the more reliable the estimate.

Adjusted coefficient of Determination (Adjusted R2)
The adjustment R2 is used to re-compute R2 to give another value and to take care of non-sense variables. If the R2 is
higher it is good fit but it it lower it is bad.

R2 simply implies the coefficient of determination (COD) that is adjusted for by taking into consideration the no of
explanatory variables so as to remove the effect of insignificant regressor.
Test of Significant
The t-test describes the statistical significance of the reliability in the parameters estimated. A student t-test must be
performing to determine the significant or otherwise of each explanatory variable in the model. If the value of t-
calculated is greater than the value of t-tabulated, we reject the null hypothesis (HO) and accept the alternative (H1)

3.3 Economic Criteria

42

Vol 2, No 3, 2011

The economic criteria determine the reliability of the statistical criteria, and in particular the standard errors of the
parameter estimates.
Durbin Watson (DW)

The test will be employed to test the degree of correction. A value of DW close to 2 indicates absence of auto
correlation in disturbance. It should be noted that the d-statistic is not a satisfactory test when the explanatory
variable include a larger value of the series itself.
3.4 Sources of data
The data is gotten from statistical bulleting of the central bank of Nigeria.

3.5 Method of Analysis
The use of OLS ordinary least square and time series data shall be used for all variables over the period

3.6 Data Analysis
The data are been calculated by the SPSS software package.
MODEL 1
Variable Coefficient Std. Error t-statistics Sig
C 215781.0 16867.561 12.793 0.000
XI -2.280 0.723 -3.153 0.006
X2 960.016 119.678 8.022 0.000
X3 -7.808 1.130 -6.908 0.000
X4 25538.003 10006.760 2.552 0.021
R-Squared = 0.840
Adjusted R-squared = 0.799
Durbin - Watson statistics = 1.315
Then, Y = 215781.0 – 2.280XI + 960.016X2 – 7.808X3 +25538.003X4

MODEL 2
Variable Coefficient Std. Error t-Statistic Sig
C 190514.5 20599.392 9.242 0.000
TSE 0.172 0.033 5.914 0.000
INF 633.115 553.457 1.144 0.623
EXR 1913.603 229.104 8.353 0.000
R-Squared = 0.888
Adjusted R-Squared = 0.874
Durbin – Watson Statistics = 0.901
Then, RGDP = 0.888TSE + 0.874 + 0.901EXR
Data Interpretation
The above expression shows that the share index is positively related to the related to real GDP denoted Y. Also the
market capitalization and the transaction of stock exchange.
The R2 which is the correlation of coefficient the measures how much dependent variable (Y) that is explained by
the independent variable (X1, X2, X3, X4) is 84%, this is a good fit it shows that a total of 84% of Y is explained by
the explanatory variable X1, X2, X3, X4 and also in the second model the (RGDP) is the dependent variable that is
explained by the independent variable (TSE, INF, EXR) is 88% this is a good fit it shows that a total of 88% of
RGDP is explained by the explanatory variable X1, X2, X3, X4 from the period under consideration 1980-2008.
The R2 which is the coefficient determination is 79%, meaning that a total of Y is explained by the four variables
and the model two is 87.4% meaning that a total of RGDP is explained by the three variables.
4.0 Findings
This study has attempted to examine the various sources growth wide capital market institutions to SMEs in Nigeria.
It looks at the impact of these sources on SMEs the survival on the economy.
The following were deduced on this research works.

43

Vol 2, No 3, 2011

1. It was observed that it is difficult for SME to expand above particular size. This is attributed to many
resources one of which is under-financed and SMEs suffer from inadequate working capital and have difficulty in
finding their purchase of materials, when payment are held the people it constitute a large part of financial payment.
2. It has also been known that equity securities sometimes known as financial plans and compos of long term
source of find such as equity share capital all these are not easy to achiever.
3. It also creates the availability of stock exchange gives the SMEs more flexible capital structure and are also
able to vary their financial status that SMEs towards the economy.
4. The findings reveal that SMEs have access to source of funds and growth. They have the ablity to raise
funds with which is easier and more successful where the firs are listed or quoted I stock exchange.
bulletin should be tied to the stock market.
5.0 Conclusion
This project has high lightened and expatiates the component of the topic, and there are several sources to this they
are share index, market capitalization, transaction at stock exchange, turnover, inflation and exchange rate. Despite
the loans disbursement to the economy. However, the growth of SMEs are hindered because of these factors;
incompetence of banks’ staff in project appraisal, loan recovery threat, inadequate equity contribution toward the
economy and high autonomous exchange rate.

These hindrances are curbed by some of this factors which are strengthening existing specialized credit scheme,
eliminating undue influence market for the economy effective project management by banks, development of
modern technologies and establishment of non-governmental organization and also the provision of guaranteed
schemes.

The available data shows the capital market are toward the economy and it’s done quickly through equities,
turnover, profit after tax industrial loan. The correlation rate of the model listed also agrees that there is high
correlation between share index, turnover, exchange rate, and inflation rate.

Lastly, all parties unanimously agrees that the concept and design of the funds is a right step in the right direction
and that all that is needed is some training on the part of the government to adjustment operations of financial
institution to the peculiarities of the Nigerian economy climate.

Table i:Data from CBN statistical bulletin
YEAR REAL SHARE MARKET TRANSACTION AT TUROVER INFLATION EXCHANGE
GDP INDEX CAPITALIZA THE STOCK
TION BILLION EXCHANGE
1980 31548.8 - - 388.7 0.51 10.00 0.5445
1981 205222.1 - 5.0 304.8 0.32 21.42 0.6369
1982 1999685.3 - 5.0 215.0 0.85 7.16 0.6702
1983 185598.1 - 5.7 397.9 0.58 23.22 0.7486
1984 183563.0 - 5.5 256.5 0.47 40.71 0.8083
1985 201036.3 1413.4 6.6 316.6 0.51 4.67 0.9996
1986 205971.4 1797.8 6.8 497.9 0.6 5.39 3.3166
1987 204806.5 2123 8.2 382.4 0.68 10.18 4.1916
1988 219875.6 2418.9 10.2 550.3 0.44 56.04 5.3530
1989 238729.6 3286.4 12.8 610.3 0.28 50.47 7.6500
1990 267550.0 5083.9 16.3 225.4 0.72 7.50 9.0001
1991 265379.1 8089.4 23.1 242.1 0.6 12.70 9.7545
1992 271365.5 11172.2 31.2 491.7 1.1 44.81 19.6609
1993 27483.3 14749.3 47.5 804.4 0.8 57.17 22.6309
1994 275450.6 22958.7 66.3 985.9 0.9 57.03 21.8861
1995 281407.4 45781.4 180.4 1838.8 1.02 72.81 21.8861
1996 293745.4 71461.7 285.8 6979.6 2.5 29.29 21.8861
1997 302022.5 91663.1 281.9 10330.5 3.9 10.67 21.8861
1998 310890.1 71542.3 262.6 13571.1 5.2 7.86 21.8861
19993 12183.5 63170.3 262.6 13571.1 5.2 7.86 21.8860

44

Vol 2, No 3, 2011

1999 312183.5 63170.3 300.0 14072.0 4.1 6.62 92.5284
2000 329178.7 80414.1 472.3 28153.1 5.9 6.94 109.5500
2001 356994.3 122170.9 662.5 576833.8 8.9 18.87 112.4864
2002 43320.5 139582.4 764.9 59406.7 7.9 12.89 126.4000
2003 47953.0 186718.7 1359. 120402.6 8.6 14.0 135.4067
2004 527576.0 296863.8 2112.5 225820.0 11.6 15.01 132.6700
2005. 561931.4 274520.6 2900.1 26295.0 10.1 17.85 130.4000
2006 595821.6 337219 5121.0 470253.4 N.A 8.24 128.700
2007 634251.4 585279.7 13294.6 1076020.4 N.A 5.38 124.7451
2008 674889.0 610418.13 9516.2 1679138.1 N.A 11.60 119.7925

SOURCES: THE CENTRAL BANK OF NIGERIA STATISIAL BULLETING

Table ii: Regression results
ANOVAb
Model Sum of Squares Df Mean Square F Sig.
1.Regression 1.9E +011 4 4.814E+010 20.934 .000a
Residual 3.7E + 010 16 2299533912
Total 2. 3E+011 20

a. Predictor: (Constant), X4, X3, X1, X2)
b. Dependent Variable: Y
c.
Coefficientsa
Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error t Sig.
1. (Constant ) 215781.0 1686.561 12.793 .000
X1 -2.280 .723 -1.876 -3.153 .006
X2 960.016 119.678 6.870 8.022 .000
X3 -7.808 1.130 -5.453 -6.9022 .000
X4 25538.003 10006.760 .893 2.552 .021

Residuals Statisticsa
Minimum Maximum Mean Std. Deviation N
Predicted Value 100015.14 578954.9 292668.7 98119.71526 21
Residual -87537.7 104986.3 .0000 42890.87467 21
Std. Predicted -1.963 2.2918 .000 1.000 21
Value
Std. Residual -1.825 2.189 .000 .894 21
a. Dependent Variable: Y

Model Summaryb
Model R R Square Adjusted R Std. Error of the Durbin Watson
Square Estimate
1. .942a .888 .874 54466.06630 .901
a. Predators: (Constant), EXR, INF, TSE
b. Dependent Variable: RGDP
ANOVAb

45

Vol 2, No 3, 2011

Model Sum of Df Mean Square F Sig.
Squares
1. Regression 1.9E+011 4 4.814 +010 20.934 .000a
Residual 3.7E+010 16 2299533912
Total 2.3E+011 20

A. Predictor: (Constant), X4, X3, X1, X2
B. Dependent Variable Y

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficient

B Std. Error
1. (Constant) 190514.5 20599.392 9.249 .000
TSE .172 .033 .412 5.194 .000
INF 633.115 553.457 .081 1.144 .263
EXR 1913.603 229.104 .681 8.353 .000

a. Dependent Variable: RGDP

Residuals Statisticsa
Minimum Maximum Mean Std. Deviation N
Predicted Value 195438.5 716644.8 321525.6 144820.19045 29
Residual -166406 72718.98 .00000 51465.59511 29
Std. Predicted -.871 2.728 .000 1.000 29
-3.055 1.335 .000 .945 29
a. Dependent Variable: RGDP

References
1 Alile H.I., ‘The Development the Nigerian stock exchange problems and prospect. Paper
Presented at a seminar to mark 20th anniversary of UBA ltd October 1981
2 Aluko S.A., ‘Textbook on small scale industries’ volume 3, March 1973

46

Vol 2, No 3, 2011

3 Akingbehin S.S., ‘The role of capital market, paper derived at financial institution
Trading centre’ Lagos on the 8th February 1989 page 1
4 Ajayi C, ‘Financial management in small scale industry’ volume no 2 1995
5 Carry L & Edwin, Small and medium scale industries’ Longman publisher 1996
6 Asika N. (1991); “Research methodology in behavoural sciences” Longman Nigeria
7
8 Benji O, “The Nigerian capital market, bullion central bank publication’ volume 18 No 2 page 25
(April/June 1994)
9 Bervil, Financial markets. ‘The accumulation and allocation of fund’ McGraw Hill company 1973 page 3
10 Ishola K.A. ‘The macroeconomic’ 2002
11 Koutsoyiannis, A. (1977) ‘Theory of econometric’ Palgrave publishing ltd, New York.
12 Koutosyannis, ‘Theory of econometrics’, second edition Macmillan press 1992.
13 Obitayo K.M., ‘Government industrial policies in respect of small and medium Scale’ volume 15 No 3
1991.
14 Obikoya, ‘Small and medium scale problems and prospects’ volume 14 No 2 1999
15 Ojo A.T., ‘Small and medium scale problems and prospects’ volume 14 No 2 1999
16 Ojo A.T., ‘Nigeria system problems and prospect in the contents of Nigeria Economic growth business’
1988
17 Okigbo P.N.C, ‘Nigeria financial system, structure and growth’ Longman group Ltd UK 1998 page 29
18 Owolabi A, ‘Two way to approach to scientific research in social sciences’
19 Ogunleye, ‘Better environment for small and medium scale’
20 Okereke O, ‘Role of stock exchange S’, Page 13, 1984
21 Okigbo P, ‘The capital market and the Nigeria economy management in Nigeria’, Journal, March 1980.
22 Olu O, ‘Fundamentals of research methodology’
23 The data on the central bank of Nigeria statistical bulleting gotten
www.google.com

47

3 rjfa owolabi usman--35-47

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Similar a 3 rjfa owolabi usman--35-47

Similar a 3 rjfa owolabi usman--35-47 (20)

Más de Alexander Decker

Más de Alexander Decker (20)

Último

Último (20)

3 rjfa owolabi usman--35-47